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GST to be set to 0% on June 1, no SST until later on – what are the implications for Malaysian car prices?
In Cars, Local News / By Jonathan Lee / 16 May 2018 8:31 pm / 47 comments

The application of the old sales tax (left) on a car,
versus the current goods and services tax (GST, right)
The ministry of finance has just announced that Malaysia’s goods and services tax (GST), currently set at six percent, will be zero-rated come June 1, in line with the new Pakatan Harapan government’s promise to abolish the tax within 100 days of it coming to power. This was first announced in the coalition’s manifesto for the 14th general election.

Unlike what was previously announced, this effective elimination of GST will not coincide with the introduction of a sales and service tax (SST), as outlined by Pakatan Harapan in its manifesto – instead, there will simply be no tax on goods and services until a new tax structure is announced later on. Items that have already been GST-exempt will remain as is.

UPDATE: MoF has confirmed on May 17 that SST will be back – full story here.

While the move will surely be well-received, it throws a huge curveball, especially when it comes to car prices. Automotive companies are still in the dark regarding the effects of abolishing GST in favour of SST, whether prices will go up or down – and they haven’t had a concrete answer for prospective customers.

As recently as Monday, Edaran Tan Chong Motor’s sales and marketing director Christopher Tan said that car prices might actually go up slightly if the previous 10% sales tax (which was superseded by GST) is reinstated without changes. This is due to previous experience with moving from the sales tax to GST, which saw prices go down across many brands.

2018 Subaru XV 2.0i-P Media Drive Nissan Serena C27 2018_Ext-4
Subaru and Nissan have already announced price protection schemes
to safeguard buyers against car price fluctuations
In fact, carmakers and distributors such as ETCM (Nissan) and Motor Image (Subaru) have already introduced price protection schemes that would maintain prices for a limited time should they go up post-SST, and refund buyers in the form of service vouchers should the opposite happen.

With the abolishment of GST effectively brought forward, these companies will likely have to do these adjustments in two steps – refunding buyers who booked before June, then maintaining the pre-SST prices from then on out. That is if SST is implemented within the eligibility period of the respective schemes, which for Motor Image is until August 18 – the end of the new government’s first 100 days.

UPDATE: Story has been edited and includes the general scope of changes that will come about with the switch to 0% GST.

Whatever it is, car prices should go down on June 1 as GST is reduced to 0%, but by how much? An industry source told us earlier that buyers might not see current selling prices being exactly six percent cheaper for all brands immediately, as carmakers have paid GST all along the production and distribution process, and the tax isn’t just charged to the customer in one lump sum.

Nonetheless, the input tax that has been paid along the chain for existing inventory by the manufacturer and distributor can be claimed back from the government, and in a relatively short period at that. Thus, within a quick time frame, buyers should expect to see selling prices exactly – or close to – as that listed currently in a price list before GST is imposed.

In fact, for a short period, consumers could well be looking at a vehicle purchase with no GST and SST imposed, that is until the latter comes into effect. When SST will be reintroduced remains to be seen.

In any case, carmakers are already in the midst of calculating the revised prices without GST, and we will share them with you once they are announced, along with more details from the government as and when we get them. In the meantime, you can read in further detail on how GST affects the selling price of a car here.

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After trying to pursue a career in product design, Jonathan Lee decided to make the sideways jump into the world of car journalism instead. He therefore appreciates the aesthetic appeal of a car, but for him, the driving experience is still second to none.

Comments

drMpower on May 16, 2018 at 8:39 pm
So why not they reduce the price first.

GST refund is confirmed under this new government.

Like or Dislike: Thumb up 26 Thumb down 2
Faiz on May 16, 2018 at 8:43 pm
From gracious PH to all Malaysians!

Like or Dislike: Thumb up 24 Thumb down 0
New Government New Hope for 30% on May 17, 2018 at 8:31 am
Now it is not a good time to buy a car. The GST and SST are uncertain times.

But forget this GST and SST which will be sorted in June. More importantly, one of Pakatan’s manifestos is to reduce car prices by 30%.

You see, before BN made this promise of reducing car prices by 30% (which they never honoured), Pakatan, through their campaign “Turunkan Harga Kereta” also made this promise before BN did. This is why BN copied Pakatan’s promise to reduce car prices.

Remember the campaign “Turunkan Harga Kereta” which we all put yellow stickers behind our cars? I think the campaign was strongly supported by Rafizi also.

So, these are uncertain times. Pakatan Government will reduce car prices by 30% and honour their campaign promises.

So, these are uncertain times. Even after June, if you buy a car, the same car might be 30% less later in this year.

You buy RM100k now, later in the year, when the same brand new car is sold for RM70k, you will cry like a newborn baby with his pampers on

Like or Dislike: Thumb up 18 Thumb down 3
Andy Teng on May 17, 2018 at 8:49 am
All Paul Tan readers are happy that this site does not have fake news anymore. The troll is no more around because he cannot get his gaji. Once all the AP is abolished and a good clean up happens…..car prices will drop a lot

Like or Dislike: Thumb up 2 Thumb down 0
Alson P on May 17, 2018 at 2:03 pm
Oblivious.. Without GST and SST implemented, car prices will reducing 30%.. Hopefully the SST will not be implies for long time.. So the car prices do not hike soon.. Malaysia Ku maju..

Like or Dislike: Thumb up 2 Thumb down 0
Jonathan Lee (Member) on May 17, 2018 at 1:48 am
Yes, there will be a refund, but it’s simply from the existing GST mechanism, as mentioned in the updated version of this article.

Like or Dislike: Thumb up 4 Thumb down 0
New Government New Hope for 30% on May 17, 2018 at 8:33 am
Jonathan, can you give us a follow up on PAkatan’s promise to reduce car prices?

Like or Dislike: Thumb up 6 Thumb down 0
Alliances on May 16, 2018 at 8:45 pm
Tan chong bullshit. They just want to sell more insurance scheme

Like or Dislike: Thumb up 34 Thumb down 5
Rafiq on May 16, 2018 at 9:30 pm
Rilek… welcome to visit UMW Toyota

Like or Dislike: Thumb up 27 Thumb down 5
Jonathan Lee (Member) on May 17, 2018 at 1:37 am
Chris’ comments came before this latest announcement, when it was still assumed that SST would directly and immediately replace GST. Again, we’d like to point out that the prices of many cars actually came down when the sales tax was replaced by GST three years ago, so his point remains valid, and we still don’t know if car prices will be cheaper or more expensive than GST-era prices when SST does come into effect.

Like or Dislike: Thumb up 8 Thumb down 1
New Government New Hope for 30% on May 17, 2018 at 8:34 am
We are concentrating to much and GST and SST. Pakatan made the promise to reduce car prices by 30% 5 years ago…..

Like or Dislike: Thumb up 5 Thumb down 2
Andy Teng on May 17, 2018 at 8:51 am
There were hundreds of cybertroopers that old gomen had to pay like RM10k each.

There alone we can save hundreds of millions…..can give cheaper cars.

Like or Dislike: Thumb up 1 Thumb down 1
Digidigi on May 16, 2018 at 8:57 pm
Last time gst implemented car price reduce, so this time if the price no increase then consider good alr

Like or Dislike: Thumb up 1 Thumb down 6
applegreen on May 16, 2018 at 10:37 pm
BR1M so no problem

Like or Dislike: Thumb up 3 Thumb down 2
YB Albert on May 16, 2018 at 9:07 pm
Simple.Dont buy,if u r unsure.
Whats the point of getting service vouchers?
Just get the best possible deals after June 1,by then more rebates will be given,cos stocks r building up.
High time car distributors reduce prices.Their margins are obscene.

Like or Dislike: Thumb up 22 Thumb down 2
DK on May 16, 2018 at 9:59 pm
I agree. By right car prices may come down. I may even trade in for an SUV and might even snag a cheap sportscar as a second car!

Like or Dislike: Thumb up 1 Thumb down 8
commentator44 on May 17, 2018 at 1:40 am
If new car price drop, trade in value will also drop as well. Hence buyers with trade-ins may not enjoy the full effect of no GST. The only one that benefits most are first time buyer.

At this moment, car sales will be down till June. May sales is gone, salesman will eat grass this month. Stock value of car dealers plummets immediately unless there is more clarity to claim GST for stocks which already paid.

But biggest loser are usedcar dealers. Pity them have to suffer heavy losses on their existing stocks.

New and usedcar market are highly corelated.

So it will be critical to see how great is the impact to the usedcar market and how long market prices will stabilize.

Car buyers, esp for usedcar, may also find it more difficult to get bank loan as Banks will be more cautious in lending in this period of price incertainty.

So my humble advice to car buyers are:
A) consider yourself lucky if u can find a buyer for your trade-ins, but be prepared to accept a much lower price compare to before;

B) try get apply a bank loan first

Happy shopping!!

Like or Dislike: Thumb up 2 Thumb down 1
New Government New Hope for 30% on May 17, 2018 at 8:40 am
Car prices will drop cause Pakatan Government will stop all the leakages in our country. That alone will save tens of billions of ringgit per year.

No more corruption. No more fake news from cybertroopers also

Like or Dislike: Thumb up 0 Thumb down 2
Ahmadjr on May 16, 2018 at 9:19 pm
Heil mahathir

Like or Dislike: Thumb up 7 Thumb down 15
U-Tun on May 17, 2018 at 12:32 am
Hell or hail?

Like or Dislike: Thumb up 4 Thumb down 2
john on May 16, 2018 at 10:12 pm
Hehehe. Buy car now b4 the big SST shock comes. Remember, my Biza special famili package is plot limited so 1st come 1st serve.

Like or Dislike: Thumb up 3 Thumb down 30
Embek on May 16, 2018 at 10:57 pm
There u r john. I tot u already fired.

Like or Dislike: Thumb up 16 Thumb down 0
TopsyBoXyTurvy on May 16, 2018 at 11:03 pm
He has escaped to indonesia now

Like or Dislike: Thumb up 9 Thumb down 0
New Government New Hope for 30% on May 17, 2018 at 8:41 am
Time for you john to stop giving PT readers fake news. We are fed up

Like or Dislike: Thumb up 0 Thumb down 0
New Government New Hope for 30% on May 17, 2018 at 8:39 am
You should be worried about prison time instead of sarcastic comments.

Like or Dislike: Thumb up 9 Thumb down 0
Geng Cukur on May 17, 2018 at 9:32 am
Baru nampak barang hidung…

Like or Dislike: Thumb up 0 Thumb down 0
Choy on May 16, 2018 at 10:31 pm
Dear Editor, the GST that a company needs to pay to government is (Output tax-input tax), if a company with high purchase and low sales, the GST collected via sales might be less than the GST they paid via buying inventory/stock, thus in that month the tax they need to pay to government is in negative value-> meaning that government needs to pay back the GST to that company which the company has spend during buy inventory/stock, thus it is noncent saying the company has paid for inventory and cannot reduce the price directly 6%. So whatever we need to pay to buy car is just the price before GST as of now, as simple as that. Pls get the fact right

Like or Dislike: Thumb up 19 Thumb down 1
Wp on May 16, 2018 at 10:59 pm
Ditto and absolutely factual. If on 1 June the car prices did not effectively reduce by the 6% gst then it just means the dealer is profiteering from the buyer. On the other hand, car companies can still profiteer by reducing the discounts/rebates post-1 June. So buyers, please beware and do comparison of net price today versus post-1 June, taking into account rebates as well.

Like or Dislike: Thumb up 7 Thumb down 0
Jonathan Lee (Member) on May 17, 2018 at 1:32 am
You are indeed correct, and the article has been updated after seeking clarification from other sources. I apologise for the error and thank you for pointing it out.

Like or Dislike: Thumb up 7 Thumb down 0
Mzma on May 16, 2018 at 10:55 pm
From the picture not much difference & price could be lower cause 6% GST charge on “GRAND TOTAL CAR PRICE” compared to SST 10% charge on “Govt Approved Car Selling Price”… Most car extra accessories charge consumer around 15% to 30% from Nett Selling Price.. Tan Chong Motor dont bluff people laa..

Like or Dislike: Thumb up 11 Thumb down 2
seancorr (Member) on May 16, 2018 at 11:55 pm
Time to go shopping come 1st of June.

Like or Dislike: Thumb up 1 Thumb down 1
Middle Age Driver (Member) on May 17, 2018 at 12:13 am
This calculation is incorrect. The company has to pay GST at every level from supplier’s profits, contract assembling profits to transportation of vehicles nationwide. If the GST is removed, the company would have saved all these cost & therefore can passed it on to consumers through lower govt approved priced. The govt approved price is based on percent of tax + proposed price submitted by the company.

Like or Dislike: Thumb up 5 Thumb down 4
Jonathan Lee (Member) on May 17, 2018 at 1:39 am
Indeed, you are correct. The article has already been updated to reflect this.

Like or Dislike: Thumb up 2 Thumb down 3
Rip on May 17, 2018 at 5:50 am
To think that sellers will reduce price because tax has been abolished is just wishful thinking. Believe me. They’ll keep the margin to themselves.

Like or Dislike: Thumb up 3 Thumb down 0
New Government New Hope for 30% on May 17, 2018 at 8:57 am
Not if we have people power. Remember people power overthrew a high corrupted Government recently.

If people power is strong enough, car prices will drop

Like or Dislike: Thumb up 1 Thumb down 1
low class worker on May 17, 2018 at 7:47 am
when the minimal salary rm1500 is implemented then will have different story. 50% increase will sure impact on all the sale item

Like or Dislike: Thumb up 0 Thumb down 0
Concern reader on May 17, 2018 at 7:16 am
Hai paultan. Pliz giv example of calculation for standard proton price. People here dunno how to calculate. John only know how to bash. N other people also bashing. Its not like they gonna buy new car straight away

Like or Dislike: Thumb up 1 Thumb down 0
kereta proton tak ada quality on May 17, 2018 at 7:59 am
Only new car sales have same price tag all across the country. How about other goods like car spareparts and accessories. I remember and have seen one sparespart i was eyeing to buy a few weeks before gst was priced around rm100 from a seller, but after weeks 6% gst implemented that particuar sparepart price was tagged nearly rm250. The seller simply said the price increased was due to 6% gst. All sellers now give reason on 6% gst to allow them make multiple % huge profits. Now let’s see if the price could reduce back to rm100 after 0% gst. Guess what it will be!

Like or Dislike: Thumb up 2 Thumb down 0
Ollie on May 17, 2018 at 10:57 am
Very very true…..

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Andy Teng on May 17, 2018 at 8:47 am
So happy this site is free from fake news about how our car prices are cheapest in the world and how our petrol prices are cheapest in the world.

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jc on May 17, 2018 at 9:18 am
car dealers will say their stock is from before 1 June 2018, so that is why still no price drop

Like or Dislike: Thumb up 2 Thumb down 1
M.K on May 17, 2018 at 9:27 am
I think for hybrid CKD vehicle, we can look at Langkawi’s price. Since it’s exempted from any duties, only GST is applicable. It should be closer to 6% reduction

Like or Dislike: Thumb up 1 Thumb down 3
Semi-Value (Member) on May 17, 2018 at 9:52 am
first of all? why price no drop when the ringgit appreciated?

Like or Dislike: Thumb up 2 Thumb down 0
BadBusinessMen on May 17, 2018 at 5:30 pm
I remembered all car dealers revised their retail prices upward for covering ringgit depreciation gap. But now, keep quiet despite ringgit regained ground for sometime. The same happened to other items on grocery stores. Only one way traffic, will government do something about it?

Like or Dislike: Thumb up 0 Thumb down 0
DN on May 17, 2018 at 10:38 am
Logically, it doesn’t make any sense to remove the GST and replace with Sales Tax that is higher. Either GST or Sales Tax, the tax collection goes to the government. Why should the Manufacturer/Dealer be worried on how to re-pricing their car? They only need to continue selling base on the approved selling pricing plus their margin.

Like or Dislike: Thumb up 2 Thumb down 0
Alson P on May 17, 2018 at 2:22 pm
Indeed.. Remove the GST will reducing cars prices.. Implement the SST in few years will hike the cars prices..

Like or Dislike: Thumb up 2 Thumb down 0
Ben Yap on May 17, 2018 at 2:07 pm
now if car price maintain the same, car manufacturers will complain that it will dent their margin.

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